Like most industries today, Consumer Finance Services businesses are being significantly impacted by the novel coronavirus (COVID-19). Troutman Pepper has developed a dedicated COVID-19 Resource Center to guide clients through this unprecedented global health challenge. We regularly update this site with COVID-19 news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge.
Our bank and loan servicing clients also face novel challenges affecting their industry due to COVID-19, particularly the ever-changing rules and regulations concerning evictions and foreclosures. We closely track these updates and have assembled an interactive tracker containing state orders and guidance documents regarding residential foreclosure and eviction moratoriums. You may access this interactive tool at https://covid19.troutman.com/.
To help you keep abreast of relevant activities, below find a breakdown of some of the biggest COVID-19 driven events at the federal and state levels to impact the Consumer Finance Services industry this past week:
- On May 7, the Federal Reserve Board invited public comment on proposed changes to Regulation II (debit card interchange fees and routing) to clarify that debit card issuers should enable and allow merchants to choose from at least two unaffiliated networks for card-not-present debit card transactions, such as online purchases. Additionally, the proposed revisions would clarify the responsibility of the debit card issuer. For more information, click here.
- On May 6, the Federal Housing Administration announced new amendments to nonborrowing spouse provisions for the Home Equity Conversion Mortgage (HECM) program, implementing additional protections for spouses involved in a government-sponsored reverse mortgage. The agency details that while HECM mortgagees can begin using the new procedures immediately for all new HECMs, those electing not to do so must implement the new procedures by September 3 or 120 days after the publication of the new mortgagee letter. For more information, click here.
- On May 6, the House of Representatives indicated that it plans to vote on eight bills, collectively referred to as the Comprehensive Debt Collection Improvement Act. Earlier this session, Congress introduced each of these bills, which include: Small Business Lending Fairness Act, Fair Debt Collection Practices for Servicemembers Act, Private Loan Disability Discharge Act of 2021, Consumer Protection for Medical Debt Collections Act, Ending Debt Collection Harassment Act of 2021, Stop Debt Collection Abuse Act of 2021, Debt Collection Practices Harmonization Act, and Non-Judicial Foreclosure Debt Collection Clarification Act. For more information, click here.
- On May 5, the Federal Reserve Board invited public comment on proposed guidelines for the system’s regional banks when considering giving access to fintech firms that obtained a banking charter. For more information, click here.
- On May 5, Judge Dabney Friedrich of the U.S. District Court for the District of Columbia ruled that the Centers for Disease Control and Prevention’s (CDC) exceeded its authority when it issued an eviction moratorium, which placed a nationwide freeze on evictions. The Department of Justice publicly stated it will appeal this decision to prevent this ruling from taking effect. For more information, click here.
- On May 4, the Consumer Financial Protection Bureau (CFPB) released two reports regarding mortgage borrowers’ struggles during the COVID-19 pandemic and economic downturn. The first report shows that Black and Hispanic mortgage borrowers are much more likely to be delinquent or in a forbearance program than white borrowers. In a second report, the CFPB states that overall mortgage complaints to the CFPB have risen to their highest level in three years. For more information, click here.
- On May 3, the CFPB Acting Director Dave Uejio and Federal Trade Commission Acting Chairwoman Rebecca Kelly Slaughter sent notification letters to the nation’s largest apartment landlords, which remind landlords of federal protections in place to keep tenants in their homes and stop the spread of COVID-19. The CDC has extended a temporary moratorium on evictions for nonpayment of rent until June 30, and the CFPB has issued an interim final rule, which took effect May 3, establishing new notice requirements under the Fair Debt Collection Practices Act. For more information, click here.
- On May 3, the CPFB was sued over an interim final rule it issued saying that collectors may face prosecution under the Fair Debt Collection Practices Act for not providing written notices to individuals being evicted, with the plaintiffs claiming their constitutional First Amendment rights are being violated because they are being required to lie. As such, the plaintiffs filed a motion in the U.S. District Court for the Middle District of Tennessee for a temporary restraining order, seeking to prohibit the CFPB from enforcing the interim rule, which went into effect on May 3. For more information, click here.
- On April 28, Senator Matin Heinrich introduced the bill, Ceasing Underserved Relief Benefits for Debt Collectors Act for 2021 or the CURB Debt Collectors Act, which seeks to prevent debt collectors who committed any violation of the Fair Debt Collection Practices Act from having access to funds issued under the Paycheck Protection Program. A similar bill was previously introduced in the House of Representatives. For more information, click here.
- On May 6, the New Jersey judiciary issued a notice that “up to 50% of judges and state court employees may be present on-site in state court locations” as of June 15. This notice comes after the judiciary previously pushed back the date for resuming in-person jury trials in April 2021 due to less promising COVID-19 levels. For more information, click here.
- On May 6, Texas Attorney General Ken Paxton filed a motion to intervene in a Florida case against the Department of Health and Human Services and the CDC for their series of orders that shut down the cruise industry. Attorney General Paxton stated, “[t]he cruise industry needs clearly defined expectations for safe operations and protection from baseless COVID-related claims while the country is reaching new vaccination records.” For more information, click here.
- On May 6, New Jersey Senate Bill 3669 was referred to the Budget and Appropriations Committee. SB 3669 would provide mortgage payment relief for residential property owners and small landlords during the COVID-19 emergency period. Creditors generally would be required to grant a mortgage forbearance if an impacted homeowner submits a written request to a mortgage servicer certifying: (1) the homeowner has suffered a negative financial impact from COVID-19; (2) the impacted homeowner’s income, after hardship, does not exceed 150% of the area median income; and (3) the impacted homeowner’s bank accounts, if any, “collectively contain less than six months’ reserves of the impacted homeowner’s gross household income for 2019.” For more information, click here.
- On April 23, the California Department of Financial Protection and Innovation (DFPI) filed a Notice of Proposed Rulemaking to add to the agency’s licenses application process. Currently, the DFPI is seeking comment by June 8 on electronic licensing and grounds for denying a license. For more information, click here.
- On April 22, the North Carolina Department of Insurance announced that it is changing its license or permit numbers for all licensees. The state is changing over to a new tracking system, and as a result, it will issue new numbers to licensees. For more information, click here.
- On May 5, the Economist discussed whether employers could require their staff to be vaccinated. Employers mandating that their employees obtain a vaccination could undermine “trust between workers and employers and that exemptions will prompt claims of unfairness from staff members not granted them or potentially put at risk.” In a similar story, the Economist also reported on the difficulties of creating COVID-19 “travel bubbles.” The Economist explained that travel bubbles are where “[t]wo or more countries that have COVID-19 under a degree of control allow people to travel from one to the other, with minimal restrictions.” Some governments have attempted to create these “travel bubbles,” such as Hong Kong and Singapore. In order to make them work, the Economist said that countries should “trust in the other’s testing regime,” and there must be some confidence that false negatives aren’t being presented when entering a new country. Also, countries should develop a robust tracing system. For those interested in learning more, see Troutman Pepper’s Law360 article about the privacy implications of contact tracing and vaccine passports.
- On April 28, the FTC reminded business leaders that they shouldn’t underestimate their role in data security oversight. There’s no such thing as “business as usual” during a global pandemic, the FTC said. The COVID-19 pandemic has forced up to “33% of the U.S. workforce” to work remotely. Security incidents can lead to “significant costs to consumers, data breaches, network intrusions, and looming cyber threats can open up a firm to substantial financial costs, reputation hits, and legal liability.” The FTC offers leaders several tips here. They are:
- Make data security a priority;
- Understand the cybersecurity risks and challenges your company faces;
- Don’t confuse legal compliance with security;
- It’s more than just preventing an incident; it includes a robust incident response plan; and
- Leaders should learn from mistakes when experiencing a data breach.